The Value of Knowledge: How the Details of Product Failures Can Shape the Future

When any loss is claimed, the immediate need is to determine how the policy applies to that specific loss and whether or not covered losses may be subrogated against a liable party. However, a surface-level analysis of submitted claims may reveal trends in product failures or types of failures that require a more in-depth analysis.

The Role of Forensic Testing in Product Failures

When the insured has identified a particular product as the cause of a loss, a forensic testing facility can attempt to duplicate the failure in a controlled manner to look for the specific component or circumstances that resulted in the loss. This testing and visual examination can lead to a deeper understanding of the environmental factors, installation conditions, defects, or misuse that result in a higher probability of failure and resulting loss incident.

A deeper understanding of the risk factors associated with different products can reveal patterns that would otherwise remain unrecognized, and this information can be useful to ascertain the specific risks associated with categories of products or common failures associated with specific makes and models of a product.

Leveraging Data to Work with Manufacturers

Data specific to a particular product can be leveraged to establish a relationship with manufacturers to negotiate what information is necessary for the manufacturer to accept liability of an event without the need for formal litigation. The agreement arrangement could be used to streamline the investigation process and minimize the cost of an investigation while ensuring the manufacturer receives the details they need to track failures and plan for future product improvements. 

For example, if a product is marketed with a service life of ten years and the data indicates that a there is a trend of a particular make and model failing at 3-5 years, the manufacturer may recognize the issue and accept liability for the value of the loss based on the confirmation by a forensic testing facility that a loss was attributed to a premature failure of that product.

Managing Scope of Forensic Testing

The amount of detail provided by a forensic testing facility will vary based on the allowable budget. In order to control the costs associated with forensic testing of a product, it’s important to agree on the scope of work and budget up front. When you have a budget in mind, forensic firms can provide recommendations of what can be done within the given budget. Example activities that may be performed by a forensic testing facility include:

• Visual examination
• Functional testing
• Microscopic examination
• Destructive examination
• Materials analysis
• Exemplar evaluation & testing
• Verbal reports
• Written reports

Establishing Failure Trends and Mitigating Risk

Depending on the type of failure, a visual or microscopic examination may be sufficient to determine if a failure trend in a particular make and model is present. For more complex failures, additional destructive examination or material analysis of the failed component may be necessary. Often, technical research into a product with known or suspected issues can supplement initial testing. Class action lawsuits, recalls, and technical bulletins can be connected to observed failures during initial testing and can substantiate failure patterns.

Understanding the details of loss incidents on a larger scale allows for greater in-depth analysis of trends in what products fail most often and why. There is inherent value in having this knowledge, and the details obtained through product testing can be used to manage risk and can be leveraged to control the cost of litigation when liability can be reasonably established.